After Monday’s post about finding cash flow positive real estate investments, I spent an hour or so on Tuesday night and put my favorite three (plus one that was in the same complex) through the property analyzer. One wasn’t going be -$120 in the first year, and $5 after the ‘normal’ rent increase. 2 of the remaining 3 show about equal numbers for the before/after increase cash flows. Now, those are MLS listings and I don’t have accurate property tax, utility, or condo fee numbers, so I’ll be asking my Realtor for the full listing data so I can run the numbers again. It’s an encouraging start. But I promised three reasons to put the phone down instead of calling your property manager, and provide I shall. I’m assuming the most interested readers will have 3 or more properties, and you’re sick of dealing with tenants. You’ve realized that when you’re doing tenant related tasks, you’re not having any fun, you’re not making any money, you’re not growing your portfolio, and you’re not making any progress towards your personal Belize. Now you’re considering hiring a property manager. That said, there will also be readers who own one or more properties and already have a property manager. For you people, pay close attention.
- The smart people are doing it. The really great investors I’ve worked with/for I seldom heard from. Good investors hire good managers and let them do their job. Good business people do the same; hire the best and let them do their job. It sounds like a weak reason to let them wreck your property, your cash flow, or otherwise make you feel bad or stupid. It isn’t.
- The 3-minute rule. Your property manager has about 3 minutes a week to give to each unit they manage. A good property manager can handle about 800 units in Edmonton; assuming a 40-hour work week, that comes out to 3 minutes per day, or 12 minutes per month. Don’t make them waste it on the phone answering your dumb questions. If you do, don’t take more than your 3 minutes, and have your questions written down before you call.
- They should already understand your concerns. It’s best to hire a property manager who understands your goals, your system, and the role that your properties play in your big picture. You’ll have communicated some of this to the broker when they agreed to have their company manage your properties. No property manager likes to have vacant properties, delinquent tenants, or the cops calling. Stop assuming they’re out to get you. Also, if a good property manager drops the rent $100, they’re doing it because that’s what the market is dictating. The difference in cash flow compared to having it sit vacant for two months is not hard to figure out. This is part of why you have a Staying Power (Reserve) Fund.
When I worked for a property management firm, we did discuss individual owner needs and goals. We did our best to understand how changes to the cash flow of a particular property impacted the owners. Don’t assume your manager is stupid and doesn’t understand. If they are stupid, why did you hire them? It’s not hard. Hire a good property manager (and/or management firm). Treat them well. Give them respect, some cash to do the repairs that need to be done (not just what’s on your projections/budget), offer them help, and when you sell your property kick some of the profit back to them. Now, some tips for making your property manager happy (which results in a better managed property):
- Remember their birthday. Send them a card and a bottle of wine, whiskey, or a Starbucks gift card.
- Talk about things which are not related to your property. Hockey is a good one, as are children or wherever you’re living currently. (We’ve managed properties from people from Japan, Hong Kong, South America, France, and all over the US. They’re really interesting to talk to.)
- Limit yourself to one call, absolutely not exceeding one hour, per month. Use email if possible, and limit yourself to not more than two emails (including replies) total per month. Keep them short and to the point, with three or less clear action items.
- Never leave a communication, phone or email, without asking how you can help them remedy the issue you’ve identified. It might be as simple as helping draft ad copy for them to use.
- If they’ve managed your property decently well for the 5 years you’ve held it, and you sell it and make more than $20,000 in your share of the before-tax profit, send your property manager to a Quickstart Live.
Hello to all the new visitors over the last couple days! I hope you bookmark us, use the RSS feed (up there on the left), or use another way to come back often. I tend to update 3-4 times a week, and comments are always welcome! – Chris